We have been reading recently that, as political appeasement to some portion of the Malaysian electorate, the share swap between Khazanah and Tune Air of 20% in MAS and 10% in Air Asia may be unravelled.

MAS chairman, Md Nor Yusof has now been quoted as saying that irrespective of whether or not the share swap is to be unravelled …….. “the special collaboration between the airlines would continue”!

If collaboration was the over-riding consideration, why was the share swap concocted and made part of the deal in the first place?

Not only that, the run up in Air Asia’s share price was unbelievably steep and closed at its historical high of RM3.95 when the swap was priced in!

At the same time, MAS’s share price had fallen to a low of RM1.60.

And lo and behold, at those prices, 10% of Air Asia’s market capitalization conveniently equated to 20% of MAS’ market capitalization ….. when the swap was made!!

Many are questioning as to why individuals have not been hauled up for the widely perceived fiddling and manipulation of the share prices of the two stocks.

OK, let’s assume that the share swap is now reversed by the government and both shareholders of MAS & Air Asia ….. i.e. Khazanah and Tune Air, are returned to status quo.

It sure doesn’t seem as though there is any effect or improvement to the scheme of things

What’s the catch then?

Well the catch is that ………. the horse has already bolted!!

When Air Asia’s share price was somehow stratospherically (relatively speaking) surging towards its high of RM3.95 ……. it allowed our dear’ol Tony Fernandes to cash out!!

Do you recall the June 2011 report that a 2% block of Air Asia shares was sold by Tony’s private company, Tune Air that netted him about RM150m …. that’s RM2.85 per share? Click HERE

The MAS-AirAsia share swap was announced in August 2011.

Interestingly, the Malaysian pension fund, EPF had increased its stake in Air Asia by about 2.85% in 2011!

Now, we all know many major shareholders of Malaysian PLCs have additional stakes in their respective PLCs via nominee companies.

Is Tony Fernandes any different?

Of course not!

Looking at the volume of shares traded during 2011, Tony F could have netted a much larger sum than the RM150m ……. vide the selling of Air Asia shares held by his nominee companies to other ‘interested parties’ in portions of less than 2% (of Air Asia’s paid up capital) …… such that those ‘interested parties’ do not need to identify themselves through filings to Bursa Malaysia.

As an illustration, if Tony F had privately through nominees, flogged off an additional 10% of AirAsia i.e. 285m shares at an average of RM3.50, it would have netted him a cool RM1.0 billion!

And who are these ‘interested parties’ that Tony F had sold to?

Ask CIMB!

Bottom line is that the shares were pushed up to justify Tony F’s ‘exit’ at those high prices paid for by ‘institutions’ that are not in their interests.

Bottom line is that it may explain how Tony F (even after paying ‘expenses’ to his ‘comrades-in-arms’) could afford to take over an English Premier League football team, QPR, and finance the acquisition of players like Shaun Wright Philips, Bobby Zamora, Djibril Cisse and Joey Barton to name a few!

Maybe, just maybe, the share swap between Khazanah and Tune Air was just a smoke screen of sorts ……. to be reversed at the appropriate time!

Maybe the real losers (and suckers) are EPF, the manager of the Rakyat’s (people’s) retirement funds and those ‘interested parties’ that CIMB can shed light on!

Maybe that’s why there are so many angry people in Malaysia when it comes to the MAS-AirAsia share swap deal …… except for those who concocted it ……. possibly for their own self-interests!

Really isn’t it?

I mean …… having to hear the same old story again and again.

One of Malaysia’s earliest corporate scandals involved the murder of this Bank Bumiputera auditor in Hongkong ……. purportedly for exposing the fraud in the infamous BMF scandal (Bumiputera Malaysia Finance, then a subsidiary of Bank Bumiputera).

And thirty years on, we hear the same old improper conduct story involving IIB, Iskandar Investment Berhad, a joint venture between Khazanah, EPF and the Johore state government tasked to spur development in the Iskandar region.

And what do we have instead?

God, what happened to those controls and transparency expected from companies with shareholders like Khazanah and EPF?

The husband of the then CEO of IIB has been charged for improperly obtaining commissions of up to RM1.6 million (read: corruption money) ….. seemingly to gain favours from IIB.

Everyone seems to be jumping onto this lucrative bandwagon of untold riches ….. notwithstanding it being improper and illegal.

It’s like from budding young officers up to CEO wannabes …….. praying and hoping that they would be appointed to those ‘lucrative’ positions so that they could milk the agencies/companies dry for their own personal gains.

To be fair, not all are like that.

But there are certainly parasites that loiter around these individuals who hold ‘influential’ positions ……. such that perceived collaboration between them becomes a very prickly and judgmental issue ….. more so if they are the spouses of these individuals!

But haven’t they heard of the saying, “You must not only be clean, but also seen to be clean”?

These characters seem totally oblivious to a very obvious aspect of corporate governance ….. transparency and integrity.

So far, the former IIB CEO, Arlida Arliff, has not been charged by the authorities.

Even if we are to assume that she is innocent, she has failed miserably in managing the situation with respect to her husband.

Absolute failure in that respect!

It’s come to a stage where derogatory jokes are being made about the government and its agencies.

It was with the thought of the Olympus accounting scandal in mind when I read the newspaper report about Malaysia’s Employees’ Provident Fund making a stupefying profit of RM6.8 billion for the 3rd quarter in 2011.

Of course, assuming from a wage earner’s point of view, many would hope and pray that those figures to be true.

But are they?

It becomes a further concern when you note the way EPF’s RM452 billion of funds have been utilised as follows:

a) Malaysian Govt Securities – RM123.5 billion (27.3%)

b) Loans & Bonds – RM150.8 billion (33.9%)

c) Equities – RM153.3 billion (33.9%)

d) Money Market Instruments – RM22.5 billion (4.99%)

e) Properties – RM1.9 billion (0.4%)

Let’s not forget that EPF has already been reported to be the largest player in the Malaysian equity and debt markets.

A Bank of America Merrill Lynch report said that EPF has literally become the market in its research paper: ‘Malaysia: The EPF’s Omnipresence’.

What is more worrying is that 67% of its RM452 billion is invested in equity and debts.

It becomes more revealing when EPF has an equity holding of about 19% of the market capitalisation of the companies listed in Bursa Malaysia.

This may not sound big in relative terms but this holding is the ‘liquid’ portion of shares held by EPF – i.e. they are shares that are constantly traded by EPF ….. in order to support its price.

The non-traded portion of these big cap companies (read: GLC) are held by the likes of Khazanah, PNB etc.

In the bond market, its dominating presence has hindered development of a vibrant secondary market. The EPF owns some 45% of the outstanding Malaysian Government Securities.

Therefore if you add the MGS to those invested in equity and debt, that would come to a whopping 94% of the funds of EPF!

One can clearly see why the government cannot afford to have a collapse in the capital and debt markets ……. hence the active buying and selling of shares in Bursa Malaysia by EPF …… in possible ‘cooperation’ with other agencies like PNB, KWAP (govt pension fund) and the likes ….. on a ‘I scratch your back, you scratch mine’ arrangement.

Is that how EPF got the RM6.8 billion return for the 3Q 2011?

And with the government debt at a level that puts in on track with countries like Greece, I shudder to think of the repercussions.

Repercussions …… if the nonsense is allowed to continue.

What nonsense?

The illicit outflows, corruption and financial mis-management …… especially the kind where individuals think that they are entitled to unfettered riches just because they have served the government one way or the other.

That, by the way, is called cronyism!!

Coming back to the EPF, one would really wonder if it would have the ability to redeem the claims of its members when they reach retirement age.

This is when I recall then Finance Minister, Tun Daim Zainuddin, proposing (which was thrown out due to political pressure) that EPF members be paid an annuity on retirement ….. as opposed to a lump sum payment.

Of course, the excuse he gave then was that many pensioners finish their retirement funds shortly after withdrawal.

But is that the truth …… or a red herring to cover the inability of the EPF to fund these withdrawals since they have been used to fund government spending on operational matters, buying shares from out-going foreign investors in order to support the local cronies and to provide long term funding to entities to buy cows and condominiums?!!

With EPF as it is now …….. who’s next?

Petronas?

Has it got something to do with former Petronas head honcho, Hassan Merican plying his profession overseas?

Some people say the darndest thing.

They do so during a moment of weakness ……. similar to then PM Tun Mahathir when George Soros publicly rebuked the former in 1998 …… resulting in Mahathir, in a moment of weakness, conceding to problems/failures in the Malaysian economy in an open interview with Malaysian TV.

Tony Fernandes has had quite a few of these moments recently ….. like telling the press he is on his way out of Air Asia…….. after realizing that he did not have the clout (read: political backing) that he used to have during the Pak Lah administration.

Furthermore, Tony Fernandes or Tony F. to his detractors is now only an employee of the UMNO led government.

He is no different from Sunrise’s Tong Kooi Ong (who is now in UEM Land), E&O’s Terry Tham (who runs to the beck and call of Sime Darby) and SP Setia’s Liew Kee Sin (whose new political master has changed from Tun Daim to the institution PNB).

Why employee?

I still maintain that Air Asia has now been taken over by the government (read: EPF).

Otherwise, the price of Air Asia would not have been allowed to rise to the ‘stratospheric’ price, relatively speaking, of RM3.95.

Let’s not forget that Air Asia’s price was languishing at around 68 sen ……. and Tony F was then looking for buyers to take over the airline.

That was when EPF came into the scene …….. around the same time the foreign shareholders were cashing out.

Tony F has done quite well, in cash terms …… as he has managed to sell at an attractive price ….. just below RM4.00!

And who had to cough the money?

EPF of course!

That’s our money!

This is how OUR money has been treated and is it no wonder that Malaysians are now desperate to withdraw as much as they can from EPF …….. lest we will be paid an annuity sum in future, instead of enjoying a lump sum withdrawal at 50 years of age or 55 years old.

Of course, the perennial question persists – why should the government acquire Air Asia in the first place?

Admittedly, the UMNO led government’s handling of the recent crisis (or any crisis for that matter) has always been based on a KNEE JERK response.

Their objective is to quickly ‘manage’ the situation so that it does not get out of hand and sully the ‘good name’ of the UMNO led government.

Not anymore …… thanks to technology.

The other reason for the Air Asia purchase …….. is also to manage the perpetual loss making MAS problem!

As in most Government Linked Companies, they are entrenched with dead woods that are so difficult to extricate.

You can put in Chairmens and CEOs, but the power really lies behind these Little Napoleons that wield their influence when implementing and administering the policies – will it be done in reality or just on ‘an appearance’ level?

Air Asia will be used to marginalise MAS in the long term.

Just as CIMB was used to marginalise the cash printing Bank Bumiputera enterprise until its ‘usefulness’ had expired!

Just as Proton is being marginalised (read: SOLD) to the likes of DRB-Hicoms, Nadzmis etc. Even the Toyota controlled Perodua does not want to have anything to do with Proton!

So could things be handled better?

Of course, my friend.

Can it be done under this UMNO led government?

You be the judge of it ……. after reading behind the pictures, stories and figures!!

Not many may recall Ismail Zakaria.

One couldn’t even easily get his photo online until Malaysian Business Times published it recently.

Ismail Zakaria’s name then (up to the late 1990s) was so highly thought of that he was actually touted for the position of CEO of Maybank, which he eventually lost to Ahmad Don.

Ismail Zakaria (or IZ as he is known), joined Sime Bank as CEO after a short stint with RHB Bank.

But what we read about now is IZ’s acquittal from court charges of acting beyond his authority in lending up to RM175m to companies back in the late 1990s when CEO of Sime Bank, a subsidiary of Sime Darby Berhad.

It’s amazing that such a matter would take over a decade to be dealt with ….. and even that, at the level of the Session’s Court!

But I do recall of the amazement at the way monies were expended by a bank supposedly controlled by a world renown company with fantastic governance and checks & balances – SIME DARBY BERHAD.

It is equally amazing (and galling) that in a relatively short period thereafter, we could witness the same scenario in Sime Darby’s Oil & Gas Division …… losing close to RM3.0 billion resulting from slip-shod management practices.

Actually, my point in this posting is that Malaysia’s corporate mentality still seems to be very much that if one appoints a high profile individual as CEO to a company ……. it is bound for success.

The actual track record of that person appears to be secondary.

As long as he/she has had their profile raised, CV’s polished, references ‘corroborated’ …… they appear acceptable, so to speak.

That seems to be the case for IZ then ……. and we seem to see it even to this day?

Look at the short-list for the Managing Director’s post for MAS as reported.

Just what exactly has each and every one of them actually achieved?

Ahmad Jauhari was a member of the Sikap Power team that got the mandate to build an IPP plant in Port Dickson.

Naturally, it would be built and financed by others and resulted in the project being flipped first to MRCB and then to Malakoff.

Those who originally got the mandate would make a ‘killing’ from the flipping!

Ahmad Jauhari, then spent a time as MD of Malakoff, whose control (vide MMC) by then had moved from the government to UMNO financier Syed Mokhtar Al Bukhari.

As for Rashdan Yusof ….. besides being with an audit firm and then the Thinking Company (Bina Fikir), Rashdan was also a director and shareholder of listed company, Megan Media Berhad, which collapsed so calamitously around the same time as Transmile Berhad.

And what about Kamaruddin Meranun?

Before he got his break, thanks to Snake Charmer, Tony Fernandez, what did Kamaruddin Meranun actually achieve?

He did spend some time with the Innosabah Securities Bhd Group, a stock broking firm in Sabah with subsidiaries involved in related activities eg. options and futures.

Innosabah collapsed under the same exposure that Sime Bank had then!

As for Shazali Ramli, well, he’s an apparently good marketing man especially known for his oily rolled back hair!!

Therefore, there seems to be a serious dearth of good quality CEOs for the Malaysian corporate community!

Or is it that the post of MD for MAS was earmarked for a pliant, financially secure individual who would do the bidding of the puppeteers behind the scene?

Just like Ismail Zakaria?

Ex-Sime Darby Berhad CEO, Zubir Mursid, who is facing his own court charges, must be quite positive with IZ’s acquittal.

The former head of scandal hit Satyam, Ramalinga Raju, was quoted, after his arrest for the shambolic farce relating to his company’s cooked up books including US$1.0 billion that was non-existent, as follows:

“IT’S LIKE RIDING ON A TIGER, NOT KNOWING HOW TO GET OFF WITHOUT BEING EATEN”.

It does make one wonder if Air Asia’s Tony Fernandes is facing the same predicament!

This entrepreneur, who took over an ailing airline from a croney Malaysian public listed company for only RM1.00 and then grabbed a huge portion of the Malaysian market previously monopolized by Malaysia Airlines ……. by running it more efficiently than the government airline, has now grown the airline by leaps and bounds.

He then made Air Asia’s financials look better than normal by applying purportedly acceptable practices like recognising profits before they have been earned!!

With such super figures, he listed Air Asia in the mid 2000 and is currently valued at RM10.5 billion!

Not bad for an initial investment of RM1.00!

This is when investors must take heed of the ominous signs that are currently taking place with respect to Air Asia.

He is on a roller coaster (of a tiger) ….. in an industry that is becoming impossibly competitive …. and is running out of good news!

This is when he indulges in promotional acts and statements to prop up the share price of Air Asia.

An example is a few days after having announced the acquisition of 200 planes, he makes another announcement of his intention to acquire another 100 planes!

Don’t these costly acquisitions require detailed study ….. unless it is just for show?

Of course, my critics will retort that I’m just being a sour puss …… how can a single man singularly raise Air Asia’s share price from 80 sen to RM3.95!

Ah, this is where the recently announced ‘collaboration’ between the government owned Malaysia Airlines and Tony’s Air Asia comes into play.

MAS is as good as a goner due to it being a political entity where besides having been a cash cow for UMNO cronies in the past (read: Tajuddin Ramli), laying off its largely dead woods amongst its 20,000 employees ….. is politically non-acceptable.

Therefore, whatever that needs to be done has to be done subtly and it will be in the form of Air Asia.

This leads me to the conclusion that Air Asia is not singularly controlled by Tony Fernandes nor Tune Air!

Why?

Air Asia’s phenomenal rise in share price is due to the accumulation and support of its shares by government agencies like EPF, Value Cap and Tabung Haji as reported in the press.

This is indeed an exit exercise for Tony Fernandes …… in order for him to indulge in other vices ….. like buying a football club like Queens Park Rangers!!

I was having my usual ‘teh tarik’ sessions with friends of mine recently and the topic of the cost of living would invariably pop up for conversation.

The recent announcement of the price hike in the electricity tariffs was mentioned and I did not realize that it was such an emotional subject to all!

The effect of a rise in an already significant monthly expenditure for a normal working family will naturally not be easily accepted …… more so if only one of the two spouses is working!

This becomes even more emotional when we find out that the rise is not so much due to the government wanting to reduce ‘subsidies’ ……… BUT more so to maintain the ‘obscene profits’ of the Independent Power Producers (IPPs)!

How?

The Government (via Petronas) reduces fuel subsidies to IPPs (used to generate electricity) by charging closer to market rates BUT

Tenaga then raises tariffs for electricity consumption on consumers i.e. Rakyat AND

Tenaga subsequently pays for the electricity it has to mandatorily purchase from the IPPs, at an increased rate (even if the electricity generated by the IPPs is not used) ……. such that it maintains the IPPs’ obscene profit margins under the lop-sided Power Purchase Agreement.

This may explain why Tenaga revealed that its ‘bottom line’ i.e. profitabilty is not expected to increase significantly after the tariff hike …… it will all go to the IPPs!

This may also be the reason why the government is adamant NOT to make publicly known the details of the Power Purchase Agreement between Tenaga and the IPPs.

The excuse given by the Minister in charge of utilities, Peter Chin, that the government has no power to reveal those agreements is ……. HOG-WASH!

Tenaga Nasional Berhad, whilst a public listed company, is a Government Linked/Controlled Company with Khazanah controlling nearly 70% of its equity.

So what’s the problem?

If the highway concessionaires can do it, why can’t the IPPs?

It is obvious that the owners of the IPPs …… from the YTLs to the Malakoffs …… are earning obscene profits at the expense of the Rakyat.

The obscene profits then flow down as dividends to the major shareholders of those IPPs (read: YTL : Francis Yeoh family and Malakoff : Syed Mokhtar Albukhary family) who then make Substantial Contributions to UMNO and its ilk)

What is being done is totally contradictory to what the UMNO led Barisan Nasional government is claiming they are doing ….. i.e. cleaning up the administration, eradicating corruption and putting the interest of the people before anything else!

It is about time the concerns of the silent majority in the Rakyat be made known at the next General Elections.

The race card appears to be the least of our priorities at the moment.

It is the eradication of CRONYISM, CORRUPTION & CONVOLUTED COSTS that should be our priority.

The rot appears to be too deep for the current administration to dig themselves out of!

Click HERE for Peter Chin’s lame excuse for not revealing details of IPP.

And HERE to get some background perspective of how TNB were arm twisted then.

UPDATE (3 June 2011) : Click HERE and here it from the ‘horse’s mouth’, Ani Arope and his description of EPU as the ‘Economic Plundering Unit’.